>> in neighboring iraq, several thousands of protesters took to the streets in the capital baghdad, where shias are the dominant population. an attack on a sunni mosque was reported in hila, about 100 kilometers south of baghdad. no one has claimed responsibility, but authorities indicate a possible link with the cleric's execution. sunni-led saudi arabia severed diplomatic ties with iran after demonstrators attacked the saudi embassy in tehran. the latest move. the saudi foreign minister said his country would end air traffic and trade links with iran. and leave the country within 48 hours, and the united arab

emirates announced it will downgrade diplomatic relations with iran. a white house spokesperson with the u.s. said the u.s. government is urging the government to show restraint. >> a spokesperson said the talks are aimed at condemning the actions against the saudi arabian embassy in tehran. now more from tehran. >> reporter: the attack on the saudi embassy might have the tensions have long simmered between the two countries, each led by a different muslim sect. saudi arabia by sunnis and iran by shias.

the majority of people in iran are shia, and here in the capital of tehran, many reject saudi arabia's decision. >> translator: saudi arabia is scared of iran's power. that's why the country is looking for a pretext for damaging ties. >> translator: we don't want to fight, but if saudi arabia wants to cut ties, let them do it, but we don't want a war to start. >> reporter: but this dispute has the potential to affect more than the two countries. they are both involved in various conflicts in the region on opposing sides. in syria's civil war, iran supports the government of president bashar al assad while saudi arabia backs anti-government forces. in yemen, iran is believed to be helping shia rebels who have taken hold of power by secretly providing them with weapons.

saudi arabia and other sunni-led arab nations are playing a central role in conducting air raids against them. it is believed that saudi arabia is trying to prevent iran from expanding its influence there. the two countries have also been at odds over saudi arabia's handling of a deadly stampede last september. hundreds of pilgrims, including many iranians, were trampled to death on the outskirts of the holy site of mecca. there are increasing concerns that the standoff between the countries lessens the possibility of their cooperation in the region and that it could escalate the destabilization of the middle east. it could become a stumbling block for syrian peace talks scheduled to start later this month. and it might also affect the fight against islamic state militants, a common enemy of the

two countries. kentaro shinagawa, nhk world, tehran. it's a new year, and with it, new challenges for japanese lawmakers. the ordinary session of the diet began on monday. they gathered at the diet building while protesters outside called for the scrapping of a set of security laws. the laws enacted last september are expected to take effect this year. they would expand the role of the self-defense forces and allow japan to exercise its right of collective self-defense. japanese communist party members attended the opening ceremony for the first time in 69 years. they had boycotted the ceremony on the grounds that inviting the emperor to deliver an opening address carries on the ritual of the imperial diet from before world war ii, but the party's leader says the practice has become a custom and more of a formality.

>> prime minister abe stressed his diplomatic achievements, including an agreement to hold summits between japan, china and south korea on a regular basis. he also referred to an agreement with south korea to settle the issue of those referred to as comfort women. he said japan will take the initiative in the international community as the g-7 president and a nonpermanent member of the u.n. security council. >> translator: i will exercise leadership in tackling various global challenges with the close cooperation of other nations. >> the leader of the main opposition democratic party says

this year's upper house election is crucial for japanese politics. >> translator: if the democratic party and other opposition forces fail to put the brakes on the abe administration, we may not be able to realize a change of government in the near future. >> the ordinary diet session will last until june 1st, if it is not extended. investors are worried about what they see in the middle east. investors, we did see stocks in tokyo open lower. stocks plummeted yesterday as they sold on concerns aboutenned tensions between saudi arabia and iran. european markets fell sharply. frankfurt was down more than 4%. big losses in london and paris.

the same thing on wall street. the dow jones industrial average closed down 1.6% but had losses 2.7% at one stage. the tech-heavy nasdaq lost 2% ending below 5,000. a senior economist in new york has the details over the background of the market moves. >> there are two factors that may have sparked the sell-off. first in china, caixin manufacturing pmi came in weaker than expected, indicating that china's economy may have continued to decelerate last month. china has a very heavily indebted private sector, and any slowdown in economic growth carries the risk that there will be an increase in defaults on loans. this is especially important to chinese equities, because financial companies count for about 70% of china's equity market capitalization. as such, anything that changes

the default probabilities of borrowers can move chinese equity markets in a big way. secondly, escalating tensions between saudi arabia and iran may have contributed to nervousness among equity investors in china and worldwide. oil markets didn't seem to take the situation in the persian gulf too seriously, however. west texas intermediate crude popped about 2% higher at the open but finished the day lower. 2016 is barely even begun, and it's already shaping up to be an interesting year. i'm erik norland, senior economist with the cme group in new york. so, now let's check on how share prices in tokyo opened. the downward pressure doesn't appear to be so strong. analysts say some investors are hunting for bargain shares.

nikkei trading lower down 0.5%. yen is weaker today. this is supporting market sentiment. dollar trading above 119 yen, recovering from an overnight plunge to below 119 yen. some traders are buying back the dollar against the japanese currency. the euro is still weak against major peers. china jitters and tensions in the middle east are adding to the risk-off mode. euro/yen pair trading at the lower 129 yen range. let's look at markets across the asia pacific region. the south korea kospi trading higher. in australia, shares trading down 1.1%. leaders of japanese security

companies are confident. they gave their projection at a new tokyo. the top executive of japan's largest brokerage firm predicts an upward trend. >> translator: i'm expecting the nikkei to rise, it may approach 23,000. hibino is looking to see if china's economy slows down faster than expected and if the risk will affect the crude oil market. this week "newsline" is airing a five-part series about the economic outlook for major companies. today we'll focus on the world's second largest economy. china. i asked an expert what he expects in 2016. very nice to meet you. >> thank you. >> he is dean of the asian

development bank institute. he first went to china in 1991 to promote policies for growth. he's seen the economy shoot up and slow down. what kind of year are you expecting for china in 2016? >> i think it's 5,000, 6,000. it used to be 7% and then many people believes it is 6.5% or so. i think that chinese export-oriented growth will be slightly damaged. equals a slow growth. some economists in china hope domestic investment will take over those kind of exports. especially in middle class income people are growing and consumption will grow. domestic investment grow. optimistic people say 6.5% or

6,000 can be achieved. it depends how domestic market can grow. >> one of the keys to maintaining stable growth will be china's relations with its neighbors. he points to an overseas infrastructure development planned called the silk road project. >> i think china is very much interested in connectivity with other countries -- south, west and so on -- and silk road plan is also one of those schemes. so, they are planning to have that road network. silk road i think is very good for two reasons. one in developing small businesses in the region and selling those products, and they need also. so, not only constructing highways, but providing money to small businesses and hotels, lodgings and so on. so, if the spiral effect becomes very big, then the silk road planning will be successful. but on the other hand, just

constructing roads will not make them a success. >> reporter: on the downward pressure to the economy, he believes china will largely avoid the negative effects of the u.s. federal reserve's rate hike, but he warns of domestic risks, especially possible overheating in the property markets. >> china has overinvestment in real estate industries, because chinese local government, their main tax revenue is coming from property tax revenue, and allocation of tax revenues between central government and local governments are very different from japan. income tax, corporate tax, many go from center rather than remaining in local government. so, if local government wants to keep on investing their things, then they prefer rising price of housing price and property prices. and then that government has looked at the huge loans, increase of loans to the real estate sectors, then local government has started to borrow money from no bank national institutions. that has kept on flowing down into the local government. so, there is a possibility of bubble in construction and housing market.

>> and for wednesday's installment of our "world economic outlook 2016" series, we will focus on the united states. that's the latest in business news for this hour. here's another check on markets.

kobe beef is famous for its rich flavor and beautifully marbled fat. it's also very pricey. that's because to be qualified as kobe beef it can only come from tajima cattle raised in hyogo prefecture, in western japan. since 2012, the beef's been available outside of japan, but it's so popular that supply is barely keeping up with demand. now breeders are turning to new methods to try to increase their stocks. >> reporter: buyers fight over kobe beef at auction. the highest priced beef sold for about $50 per kilogram, 20% more than the previous year's top bid. exports reached almost 50 tons in fiscal 2014, more than a threefold increase in just three

years. but production isn't expanding. many ranchers are aging, and not enough young farmers are willing to take their place. so local agriculture officials have had to look around for a new approach. >> translator: even if we don't increase the number of mother cows, we need to ensure we have enough calves. we are feeling the pressure to keep up with the growing demand. >> reporter: this pure-bred tajima calf was born last year, but its mother is a holstein dairy cow. it came from an embryo created in vitro and implanted in the holstein. this is called embryo transfer. this man has about 100 dairy cattle. he decided to try the new method to produce calves for beef.

hayashi's first tajima calf was born last march, but raising it proved far more challenging than he expected. tajima calves are more vulnerable than dairy cattle. he had to check every detail from the amount of milk he fed them to their body temperature. >> translator: i have to check them first thing in the morning and again at noon, and i take one last look at the end of the day before i go home. >> reporter: hayashi's first calf was auctioned in november. this was the very first time that a calf born through embryonic transfer had been auctioned. the final price was much the same as any other tajima calf. >> translator: although it was born from a holstein, it seems just like a normal tajima cow. >> translator: my main feeling is relief that it's finally out of my hands. i've never sold a calf for so

much before, so i'd like to continue raising tajima calves. >> reporter: right now, only six farmers are using the new method, but cooperative officials are trying to encourage more to take part. with demand from abroad looking set to surge, they want to boost the number of tajima cattle to cash in on this business opportunity. countries in southern africa are dealing with severe drought the government says almost 3 million households face water shortages and some cities are rationing supplies. nhk world has more on the situation. >> reporter: one of the hardest-hit regions is the green

belt of south africa. here is a farming land, but due to the drought, the soil has completely dried up. if the extreme drought continues, the farmer says he will not be able to harvest anything this year. >> it will not be a successful crop if we try to do everything. just not enough water. >> reporter: this climate is also taking a toll on livestock. these cows have become weak and thin. with the price of animal feed hitting record highs, local farmers are struggling to find water and food for them. >> translator: all my cows will die if the drought continues. >> reporter: more than 40,000 cattle died of hunger.

one of the five states declared drought emergency area. people are feeling the pinch, too. the drought pushed its price up by 30% to a record high. >> food is too high and nobody is able to buy maize flour because the price is too high. >> reporter: the government has been providing relief farms to save the animals and farms. the severe weather is putting pressure on people's lives. in the country, dry conditions could continue to at least march. nhk world, free state, south africa.

meteorologist robert speta joins us with dramatic images. any relief in sight? >> no relief won't be coming until spring and maybe next summer. we have el nino going on out here. that not only affects the pacific ocean but throws off the global circulation out here even into the southern hemisphere. across australia looking at wildfires. also into south africa. if we go back six months in july and august, that is the winter time down here in the southern hemisphere. you get these low pressure areas that push through with the polar front jet. this past winter due to the jet pushing farther to the south, we didn't see nearly as much rain as we typically get in the southern areas of south africa. now as we head into the summer time, this is the typically wettest time of the year. you're already in a deficit. you have this area to the north,

this banding of rain showers. that often sets down farther south. you can see a few thunderstorms blowing up. high pressure is continuing to dominate. that will be the case through weeks and months to come. a lack of rainfall. cyclones often bring in precipitation. that doesn't look like the case in the near-term, as well. conversely here in south america, very wet conditions have been taking place across paraguay and argentina. we've seen seeing flooding. recently, here into the mississippi river basin to the north, typical of el nino. this year it's been extra strong one. a lot of times people ask what

is el nino? can it change on a dime? it can. this is part of the waters out here in the pacific ocean. holds heat very good. it takes an extended period of time. talking about an entire pacific basin. you get strong trade winds. western pacific, the water often piles up. that is our normal weather pattern. once that shifts even a little bit, that throws off the global circulation in the atmosphere. this has a big role. this looks like it will stay that case. we are at the peak of el nino. you are going to look at really a long time before the weather pattern starts to get back to normal. we are talking about this. looking at windy and wet conditions out there. plus across the mediterranean. even over towards turkey, as well. we've been looking at heavy snowfall. over 100 centimeters across this

region. also cold temperatures across parts of the peninsula towards the west of the ball can peninsula. temperatures pushing into the minus teens. some border cities between turkey and syria, a lot of refugees out there temperatures drop below the freezing point. into north eastern asia, as far as near-term forecast, we have snow across the north. it will continue to pick up heading into the weekend. high pressure settling out of siberia bringing in chilly temperatures. above-average temperatures across japan, going to get back to normal. i'll leave you with your outlook.

one more story to share with you before i go. it's considered a winter delicacy in japan, and it doesn't come cheap.

blowfish hit the auction block for the first time in shimonoseki, western japan. buyers and sellers stuck with tradition when negotiating deals. they grasped each other's fingers inside a cloth sleeve in order to keep bids secret. more than 11 tons of blowfish were brought to the fish market. the varieties on offer included the coveted wild tora-fugu. one wholesaler said thanks to good weather, the haul of wild tora-fugu was nearly four times that of last year. prices are down from a year ago, but fugu is not a choice for diners on a budget. the highest grade went for roughly $100 per kilogram at the auction. and that's all for this edition of "newsline." i'm catherine kobayashi in tokyo. thanks for staying with us.

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